Mining rush brings with it riskier ventures

In president Jason Gigliotti's words, Habanero Resources Ltd. is a risky investment. "If we drill and hit on the silver, then I expect the stock to go positive," said Gigliotti, the company's president.

In president Jason Gigliotti’s words, Habanero Resources Ltd. is a risky investment.

“If we drill and hit on the silver, then I expect the stock to go positive,” said Gigliotti, the company’s president. “But if we miss, then we’re going down.”

The tiny exploration firm has properties beside the Bellekeno mine, slated to begin production this year, and the Underworld Resources’ White Saddle property in the White Gold District, which could be sitting on one million ounces of gold, according to its president, Adrian Flemming.

But Habanero hasn’t done any drilling. In fact, both the company’s news releases and Gigliotti himself talks more about their neighbours than any substantive evidence they’re sitting on a good find.

“When I did a lot of my presentations out east, I was actually probably talking more about Alexco than my own company,” said Gigliotti, following a presentation to potential investors at the Gold Rush Inn on Wednesday.

“I was saying (Alexco) is the most undervalued stock on the board and no one knows about it.”

Gigliotti is on a tour selling his company’s penny stock. The company hasn’t sold shares for more than 25 cents since January 2008, and it even went as low as two cents in December 2009.

Around 25 people showed up at Gigliotti’s presentation on Wednesday.

“We’re not a blue chip, we’re a penny stock,” he told them.

“If we hit, we’re in, if we don’t, we’re done.”

“I don’t get into geological terms, it confuses me.”

His company is a sign a new brand of exploration company is following in the wake of the Yukon’s biggest staking rush in more than a decade.

His aggressive publicity push shows he doesn’t mind getting people to invest before having results.

“That’s the risk you take,” he said.

Habanero was originally an oilsands player. With leases on several small properties in the oilsands, its stock rose to $1.70 in early 2006 when oil prices skyrocketed before crashing back to earth.

“Most of my shareholders, which had been with us for a number of years, made a lot of money on that run from 10 cents to $1.70,” said Gigliotti.

He’s been waiting to see if oil prices would rise for the last four years. It hasn’t happened.

So in the meantime – his oilsands leases still have 11 years to go – he’s taken Habanero into another hot market, Yukon mineral exploration.

While he has no data about what’s under the ground, Gigliotti has made an aggressive push to get noticed.

“My strength personally is marketing,” he said. “My strength is raising the money and telling the story.”

In the last six weeks, Habanero has sent more than 18 news releases to this paper. Many quote news articles on mines or exploration sites near their property.

A January 20 news release on Habanero’s property near Imperial Metal’s now-stalled Red Chris project quotes a National Post article on Red Chris.

On Habanero’s website, the page describing its Haldane site in Keno Hill basically consists of a blurb on Bellekeno and a copied section from a news release by Alexco.

Gigliotti defended the use of such marketing tactics as fair.

“All I’m saying is we’re painting a picture of why we’re there. Because what you’ve got to realize is most investors don’t really necessarily know all the details of the area of where you are,” he said.

“I think that’s it more than fair – more than relevant – to make people aware of an area that you’re in to let people know where you’re drilling,” he said.

“At the end of the day, it doesn’t matter what I say about somebody else’s area. In three weeks, when we drill our silver, my numbers are going to tell you what the value of the stock is. There’s no mystery of putting an ad in the paper or sending out a billion news releases. At the end of the day, what you got is what you got.”

Habanero was starting its drilling yesterday, he said.

Gigliotti said he is catering to a certain market of investors that are more interested in making money off a rush than building a solid long-term stock investment.

“People who trade 15-cent stocks are different than people than people who trade $1 stocks or $2 stocks,” he said. “What ends up happening is once it builds up volume, people start trading because it’s trading.

“Guys who look at the most active stocks in a day look at the news and then they see that these guys are about to drill, the stock traded well before, so it’s got a shot.”

That’s what Habanero did in the oilsands.

“We picked up as much oilsand property as we could, well before anybody wanted to be there,” he said. “And then when the market went crazy for a little while, our stock went way above where it should have. The market just took it. Momentum just takes stocks. That’s what happens sometimes.”

But Gigliotti says he might change gears for the Yukon.

“If we have success on the silver, than I would even consider spinning out some of the other assets of the company, so that we could then get our own focus rather than the shotgun approach, which is what people always say that we’re doing because we have so many projects,” he said.

Habanero sold 10 per cent of its shares to Pinetree Capital Ltd. at the end of last month. Its stock on Thursday remained at 14 cents, which is where it has hovered for most of the year.